Rajnish Wellness was truly born in 2015 after Rajnish Surendra Prasad Singh, our promoter, decides to incorporate a private limited company under the name and style of Rajnish Hot Deals Private Limited.

In 2018 he decides to change its name to Rajnish Wellness, but for the past 3 years the company has largely operated under the banner of “Rajnish Hot Deals Private Limited”. So what does Rajnish Wellness do? Now before we get into that, we want to take you through a brief journey into Rajnish’s Past.

A LOOK INTO THE PAST

Long before Rajnish Wellness, there existed a partnership firm QS Hot Deals and our promoter was a partner at this firm looking after sales and administration. This firm sold its products through TV Commercials and Telemarketing. If you have ever tuned into a channel and saw a pretty host sell you a mobile phone you have never heard of, you were essentially watching a TVC/Telemarketing Pitch; like Naaptol or Home Shop 18.

Clearly these deals are bargains for the price at which they are sold. Right? Well, according to responses on the Indian Consumer Complaint Forum, you might have had a problem if you ordered something off of QS Hot Deals. Here is a small collection of responses we found on the Complaint forum.

“Your service is very poor. This company is very frod. Your staff is frod. Bed company..My request to all people please not deal in this company” – Pankaj (2016)

“Same thing happened with me. They put up a picture of Samsung Galaxy s7 but delivered a cheap phone. When I called customer care and said I want to return, they said there's no return for the mobile. And, in the paper the frauds have carefully mentioned only 'Galaxy s7' and not the name of Samsung, so they said, "we have not said that we are selling Samsung to you"

Yes…. 100% Satisfaction. According to the CFO, the company closed down operations in 2017 and so, with that, we leave the past behind and venture into the present.

A LOOK INTO RAJNISH WELLNESS

Today, Rajnish Wellness sells ayurvedic, herbal and sexual enhancement products. Here is what the company does

1) They buy these products off of registered pharmaceutical companies

2) They market these products under their brand names

3) They sell it to registered distributors/stockists who eventually sell it to retailers

Currently their products are available under the flagship brand “PlayWin” and you could buy them online or off of a registered medical store.

SO HOW HAS THE PERFORMANCE BEEN LIKE?

Well considering they only market these products and don’t manufacture them, the company has largely remained asset light. It has about 18 employees on its payroll and it employs others on a contractual basis. The company has done reasonably well on the financials. They made revenues totaling 13 Crores in 2016 and 25 Crores in 2017. Their PAT; 32 lakhs in 2016 and 64 lakhs in 2017 is still fine.

But then when you were thinking that the company was going to go and improve its topline once again in 2018; the company posts a revenue of 25 Crores as of Feb 2018. Well, that’s not the only concern, the company’s receivables shot up to 13 Crores in 2018 from a more reasonable 4 crores in 2017. What this could mean perhaps is that the company extended gracious credit periods to meet revenue targets and ended up piling on receivables. As of Feb 2018 the company made a PAT of about 1.6 Crores. But we are more concerned about their future growth.

ERRATIC ADVERTISING EXPENSES

Considering they are only marketers of these products the only way to grow perhaps is to spend more on advertising and promotions. Again we see really odd patterns here. In 2017, the company spent 10 Crores on ads and then scaled it down to 5 Crores in 2018. Their business promotion expense increased to 2 Crores during the same time period and we have no idea what the company is up to. Also, the company’s operating cash flows are poor (Rs. -3 Crores) and the company’s interest costs is as high as 27 percent for some loans.

Also, these products are largely tele-marketed. They don’t really have brand pull which means companies like Rajneesh Wellness have to push their products through distributors and retailers and that is an extremely hard endeavor when you are selling Ayurvedic and sexual enhancement products whose efficacy can’t be tested scientifically. We don’t know what is the growth path for the company. Also, considering its sketchy past we don’t know if they even have a strategy in place

The company wants to raise 11 Crores and spend about about 7 Crores in funding their working capital and about 2 Crores on advertising. On a post issue basis and by annualizing latest earnings we arrive at a P/E of around 25. That’s more than fully priced in our opinion and we hope that the promoter succeeds in this endeavor.

DISCLAIMER

No content on this blog should be construed to be investment advice. You should consult a qualified financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.